ROI (Return on investment) is seen as a key performance indicator to determine business success but what are the benefits of measuring this?
ROI is a performance measure used to evaluate the efficiency of several investments. ROI measures the amount of return on an investment related to that investment’s costs.
It is used as part of analytics and serves as a benchmark for shaping marketing strategies for the future. This enables you to determine what marketing tactics are working and what areas can be improved.
Here is a closer look at some of the key benefits which can help you to understand why measuring and analysing your ROI can benefit your business by giving you a competitive advantage.
One of the most obvious benefits is how your business can gain insight on where you should be spending your money. If you discover one aspect of your marketing strategy isn’t performing or yielding the kind of results you would like, you can look at reallocating funds to a tactic that is performing better. This ensures you are optimising spend and not allocating money to underperforming activities.
Planning for attainable goals
Once you begin to analyse your ROI, you will be able to set realistic goals based on analytics to see where things can be improved. Instead of focusing on the short-term, you can begin to plan longer and set and define goals for the year ahead. This enables a business to improve their overall marketing strategy and to increase brand awareness.
Making new hires
Tracking return on investment of employees will help a business better understand what kind of people to acquire or to let go. It is useful to know if certain members of your staff are increasing or decreasing your business’s profitability. Similarly, this approach can help to determine the profitability of your departments and help to highlight opportunities for growth.
When to pivot
You can also adjust your strategy according to how your consumers are behaving. Measuring ROI helps you to identify when to pivot your marketing efforts and what impact your marketing is having overall.
Calculating the ROI for your efforts might be a challenge, but once you put some quick metrics in place, it is well worth it.
If your aim is to grow your business or perhaps make a stronger case for an increased marketing budget, it is never too late to start calculating those critical numbers that will ultimately drive your revenue.
Understanding the importance of ROI is critical for business success.